Question
Farrah Corporation is considering two projects (see below). For your analysis, assume these projects are mutually exclusive with a required rate of return of 12%.
Farrah Corporation is considering two projects (see below). For your analysis, assume these projects are mutually exclusive with a required rate of return of 12%.
Project 1
Project 2
Initial investment
$185,000
$1,100,000
Cash inflow Year 1
$230,000
$1,450,000
Compute the following for each project:
NPV (net present value)
PI (profitability index)
IRR (internal rate of return)
Which project should be selected? Why?
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Valuation Measuring and managing the values of companies
Authors: Mckinsey, Tim Koller, Marc Goedhart, David Wessel
5th edition
978-0470424650, 9780470889930, 470424656, 470889934, 978-047042470
